WASHINGTON, D.C. - Add another significant trend to the list of telecommunications sector phenomena with consequences for consumers: a major increase in the number of states and municipalities entering the market as service providers, in many cases in competition with ample private sector alternatives. That trend, and its likely effects on the market and consumers, is the focus of a report released today, “A Survey of Government-Provided Telecommunications: Disturbing Growth Continues Unabated.” The survey reports a nearly 54-percent increase in less than three years, with large up-ticks in the government provision of wireless and long-distance services.

“There are now more than 350 municipalities involved in offering commercial telecommunications services, at least 124 more than there were in early 2001. This is an increase of nearly 54 percent,” write Kent Lassman and Randolph J. May of The Progress & Freedom Foundation, who conducted the survey. “The categories of municipal service provision with the largest growth rates are long-distance telephone service, which is up 230 percent, and wireless services, which are up 1400 percent.

“Of interest, the growth in these categories has occurred despite the fact that these market segments are characterized by almost ubiquitous private sector competition,” they write. In fact, the study finds that “special advantages and protections” enjoyed by government entities – “less regulation, less taxes and fewer fees, fewer permitting obstacles, easier access to government-backed capital and various forms of public subsidies” – present “obstacles to the creation of a fair marketplace in which overall consumer welfare can be enhanced.” Thus, this accelerating trend “is disturbing and bears close scrutiny.” The survey baseline is a January 2001 Foundation study.

This trend persists despite recent news that Iowa, which had developed a major high-speed network and pursued other telecommunications endeavors at the government level, passed legislation to privatize its unprofitable, state-supported Iowa Communications Network. The bill mandating this change concluded that “the operation of a telecommunications network is a function that can be and generally is conducted by private enterprise.” Service categories with the largest number of government entities as providers: the leasing of fiber for broadband, ISP service and cable television, numbering 145, 128 and 127 offerings, respectively.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.